The email hit inboxes at the Fair Work Commission around 5pm on a Friday. It said the industrial relations umpire’s president,
Iain Ross
, was heading overseas for two weeks to attend a conference in Canada and to take time out from his hectic schedule. It also said
Alan Boulton
, a deputy president of the tribunal and a former lawyer at the Australian Council of Trade Unions, would be in charge until he returned.

Normally such an email would be ­routine, but on the commission’s strict seniority list, Boulton ranked below
Graeme Watson
, who had led some of the biggest anti-union legal cases in Australian history as a private lawyer. He would normally fill in while the president was away. Now, he was being snubbed.

The email backed up rumours that had been spreading through the clubby industrial world since Ross was appointed by the Labor government last February: Watson, ranked number three at the commission, and another Coalition appointee,
Michael Lawler
, ranked second, were being frozen out. Their out-of-favour status became official last Thursday when Minister for Employment and Workplace Relations
Bill Shorten
appointed eight new members to the commission. Two of them,
Joe Catanzariti
, a partner at Clayton Utz law firm, and
Adam Hatcher
, a barrister, are vice-presidents and slot in above Lawler and Watson. They are, in effect, Ross’s new deputies.

Though fewer than one in five Australians belong to a union, the commission, like the federal Treasury and Reserve Bank of Australia, remains a powerful institution through its ability to influence pay and how workplaces operate in important industries like transport, mining, energy and retailing.

People who follow the workings of the commission say the demotions are an example of Ross’s us-versus-them approach that has eroded the collaborative atmosphere established by his predecessor,
Geoffrey Giudice
. The new members, who include
Jeff Lawrence
, a former secretary of the ACTU, will lock in a pro-union tilt at the commission for years and could have long-lasting implications for workplaces, they say.

Significance ‘overstated’

“The tribunal has been well and truly ­relegated to that of an ALP political plaything," said
Steve Knott
, the chief executive of the Australian Mines and Metals Association, an employer lobby group.

Others say the significance of the new vice-presidents is overstated, the complaints are driven by a right-wing ideological agenda which instinctively opposes unions, and Ross is moving quickly to make the commission more responsive to the needs of employers and employees.

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“Much of this is simply political criticism of the government,"
Andrew Stewart
, a University of Adelaide law professor who specialises in industrial relations, said before the appointments were made public.

There is no dispute that the appointments are a big deal in the industrial relations world. Never in 24 years has a government interfered so directly in the body which rules on pay and industrial disputes, lawyers say.

In 1989, the Hawke government replaced the Commonwealth Conciliation and Arbitration Commission with the Australian Industrial Relations Commission (IRC). Only one member wasn’t reappointed: the communist
Jim Staples
, whose strongly worded decisions had embarrassed the commission and government. At the time jurists, Liberal politicians and civil libertarians leapt to Staples’ defence. The president of the NSW Court of Appeal,
Michael Kirby
, called on the government to respect the independence of the judiciary and published a scholarly article in the Journal of Industrial Relations defending Staples.

This time, there was no widespread outcry, a difference some attribute to Watson and Lawler’s status as Liberal appointees. Asked last week about their impending demotion, Kirby, who retired from the High Court in 2009, declined to comment. “I am more careful now to stay out of political issues," he said in an email.

The struggle for control of the commission is complicated by the interlocking ­personal histories of the people involved.

Political enemies

Lawler was a criminal prosecutor whose partner,
Kathy Jackson
, is national secretary of the Health Services Union and a political enemy of Shorten’s. One new member of the commission,
Val Gostencnik
, was a partner at Corrs Chambers Westgarth, who represented Shorten in a legal fight last year for control of the HSU. When Jackson accused Shorten of physically confronting her at an internal Labor Party vote, Gostencnik threatened to sue media outlets on behalf of Shorten, including The Australian Financial Review, that published the allegation. Shorten strongly denied the accusation.

Ross, who was appointed by Shorten, was an assistant secretary at the ACTU in the early 1990s under then secretary
Bill Kelty
, a mentor to Shorten. Ross appeared on the stage at a rally in 2005 with Shorten, who was then national secretary of the Australian Workers’ Union, and opposed the Howard government’s Work Choices legislation, according to Jamie Briggs, a federal Liberal MP. At the time, Ross was a member of the IRC. He resigned in early 2006 and became a partner at Corrs Chambers Westgarth. Three years later he was made a Victorian Supreme Court judge. When he was made president of the Fair Work commission, the government also granted him a judgeship on the Federal Court. Shorten declined to comment for this article.

Members of the commission’s tribunal normally aren’t judges, and often have no legal training, although they are granted similar protections to members of the High Court. They can only be removed by parliament or when they turn 65. They are expected to maintain discrete private lives and avoid political controversy. When they enter one of the commission’s tribunals, which are like modern courtrooms, those present are expected to stand.

Unlike regular judges, who are paid to interpret the law, members of the commission are often required to decide on questions which come down to personal judgment. The commission is regularly asked to assess the value of an individual or a group’s work, and balance the opposing interests of employers and employees. “They are required to make objective judgments about matters in which fairness is the guiding principle," said Frank Parry, an industrial relations barrister.

Minimum wage a key decision looming

One of the commission’s most important decisions this year will be to set the minimum wage, now $15.96 an hour. Beyond the effect on the economy, the ACTU will ask it to consider the needs of the low paid and their ability to ­participate in society.

The president is responsible for the ­operations of the commission, which has an $80 million budget and 300 staff. It isn’t his job to select the tribunal members – that’s done by the government – or manage them. Each member of a tribunal has an equal say on cases and the president doesn’t have the right to suggest or direct how they rule.

Given the adversarial nature of the industrial relations system, tribunal members have either an employer or union background. Once they join the commission, they are expected to put aside allegiances and rule impartially. Sometimes their backgrounds clash with their new roles.

When Ross was a member of the IRC in 1995, he was part of a three-person bench considering a union challenge over Com­alco’s plan to move workers on to individual contracts. Comalco, a unit of CRA (now Rio Tinto), was represented by Watson, its long-term lawyer from Freehills. Watson knew that when Ross was an ACTU assistant secretary he signed off on the ­campaign to fight Comalco over the contracts, which union leaders regarded as a dangerous threat to their power. In a letter, Watson told Ross he could be perceived as being biased and asked him to remove himself from the case. Ross declined. Watson then asked two queen’s counsels,
Robert Buchanan
and
Chris Jessup
, to explain why Ross shouldn’t hear the case, an argument Ross listened to from the bench. Eventually he stepped aside.

People who know both men say the ­incident added more friction to a relationship naturally strained from representing opposite sides of an often bitter debate.

Watson emerged as minor hero

Both Ross and Watson are modest, courteous lawyers who worked hard to get to the top of their profession. Lawler, who lives on the NSW south coast, has had little involvement in the commission over the past year because he has been supporting his fiancee, Jackson, who is on extended sick leave from the HSU for stress that triggered a breakdown. Since she publicised allegations of corruption in the HSU, Jackson has become a fierce critic of Shorten’s and the relationship between the union movement and the Labor Party. “Bill Shorten as Minister for Workplace Relations is the most obvious example of Dracula being in charge of the blood bank," she told the HR Nicholls Society, a right-wing discussion group, last June.

In recent years, Watson has emerged as a minor hero in the business community for seeking a more market-oriented approach to workplace negotiations. Last year, he led a decision which prevented the Transport Workers’ Union from limiting Qantas ­Airways’ use of contractors as baggage ­handlers. In 2011, he ruled retailers could hire school kids for shorter than the previous minimum shift of three hours, if they had parental consent, a decision that outraged the shop assistants’ union. The Federal Court refused to overturn the ruling.

Last year, he was the only member of a five-person full bench to oppose 18 to 41 per cent wage rises over eight years for 150,000 social, community and disability workers. The federal government took up the case as an example of its commitment to equal pay for women, who dominate that workforce. Some state governments, which will pay for the raises, complained it would further strain their budgets. Victoria put the bill at $900 million to $1.1 billion over six years.

In a dissenting judgment, Watson argued that men and women in the industry received similar pay. Making charities and other employers pay more than they could afford would merely reduce total employment, he said. A blanket direction to 4000 employers would undermine the long-term shift in Australia to negotiating wage deals business-by-business, he argued.

“To selectively extract an entire industry from the enterprise bargaining legislative framework is a change of mammoth proportions," he wrote. “It is not an overstatement to suggest that the future status of enterprise bargaining in this and other industries with similar attributes is at stake."

Power of Panel heads

One of Ross’s first big decisions was to shuffle responsibilities at the top of the commission. Lawler and Watson each ran a “panel", specialist groups of tribunal members who focus on industries. The panel heads are powerful figures who allocate cases to tribunal members. They can expect to be involved in high-profile cases. Under Giudice, they came together as an informal management committee which met regularly to discuss the tribunal’s direction.

Two months after he became president Ross increased the number of panels from four to six, an expansion that meant existing panel heads had to give up industries. Lawler lost responsibility for the Northern Territory. Watson lost hospitality and retailing, which excluded him from hearing a request to cut weekend penalty rates by 50 per cent for the fast food, retail, hair and beauty and hospitality industries. The issue hadn’t been considered since the 1960s and was seen as a big step towards helping many small businesses open on Sundays.

A full bench of the commission rejected the proposal and said there was “no reliable evidence about the impact of the existing differential Saturday and Sunday penalties upon employment patterns, operational decisions and business performance".

As part of the panel changes, the most ­junior commission member, Suzanne Jones, was placed in charge of unfair-dismissal cases. Notwithstanding her lack of seniority, the decision surprised many observers because of the position held by her husband,
Dave Oliver
, who is ACTU secretary. Lawler and Watson were also removed from several committees that manage the commission’s internal workings.

Ross’s changes disturbed many industrial relations experts who wanted the commission to encourage a freer labour market. “His task is to mobilise the total capability of the organisation; not to diminish it," said Geoff McGill, a former first assistant secretary of the Department of Employment and Industrial Relations, who worked with Watson in the private sector. “Why would you not be seeking as a president to make the best use of the resources available to you?"

Most people in the commission didn’t know Lawler and Watson would be demoted until the government tabled the bill that would create the vice-presidential positions on October 30. Ross tried to calm upset members by implying that Shorten had kept him in the dark until almost the last minute. On November 1, he sent them an email which said: “I was emailed a copy of the [sic] an earlier version of the bill late on Wednesday 24 October and provided with a limited time within which to comment."

Consultation claim Contradicted

In the email, Ross said he didn’t want two new vice-presidents unless they were paid the same as Federal Court judges, an idea already rejected by the government. “I also made it clear that absent such changes I saw little purpose in the proposed amendments," he wrote. Ross was telling Lawler, Watson and their colleagues he didn’t want them demoted unless he had the budget to hire the equivalent of a senior judge.

Ross’s suggestion he wasn’t fully consulted was contradicted by the Department of Education, Employment and Workplace Relations, which told a Senate committee it was his idea. “During consultations, Justice Ross ­proposed that two vice-president positions be created in order to attract senior legal specialists with high-level expertise and to assist him in the administration and management of the tribunal," the department wrote in a parliamentary submission filed in the second half of November.

Either the government or Ross was being untruthful, pointed out
Eric Abetz
, the Coalition’s spokesman on workplace relations. Ross declined to comment for this article.

Supporters of Lawler and Watson in the legal profession rallied to their defence. The Law Council of Australia urged Shorten to reconsider.
Les Kaufman
, a commission member about to retire, complained to Ross in an email that was leaked to the Financial Review. The Business Council of Australia objected. Shorten ignored all pleas.

Last Thursday, the day before Good ­Friday, he revealed the names of the new vice-presidents. Presumably he knew the two newspapers which had followed the story most closely, the Financial Review and The Australian, wouldn’t publish printed editions the following day.